A People's History of the United States (89 page)

Phillips pointed out that the greatest beneficiaries of government policy during the Republican presidencies of Ronald Reagan and George Bush were the superrich: “It was the truly wealthy, more than anyone else, who flourished under Reagan. . . . The 1980s were the triumph of upper America . . . the political ascendancy of the rich, and a glorification of capitalism, free markets, and finance.”

When government policy enriched the already rich, it was not called welfare. This was not as obvious as the monthly checks to the poor; it most often took the form of generous changes in the tax system.

In
America: Who Really Pays The Taxes?,
two investigative reporters with the
Philadelphia Inquirer,
Donald Barlett and James Steele, traced the path by which tax rates for the very rich got lower and lower. It was not the Republicans but the Democrats—the Kennedy-Johnson administrations—who, under the guise of “tax reform,” first lowered the World War II–era rate of 91 percent on incomes over $400,000 a year to 70 percent. During the Carter Administration (though over his objections) Democrats and Republicans in Congress joined to give even more tax breaks to the rich.

The Reagan administration, with the help of Democrats in Congress, lowered the tax rate on the very rich to 50 percent and in 1986 a coalition of Republicans and Democrats sponsored another “tax reform” bill that lowered the top rate to 28 percent. Barlett and Steele noted that a schoolteacher, a factory worker, and a billionaire could all pay 28 percent. The idea of a “progressive” income in which the rich paid at higher rates than everyone else was now almost dead.

As a result of all the tax bills from 1978 to 1990, the net worth of the “Forbes 400,” chosen as the richest in the country by
Forbes Magazine
(advertising itself as “capitalist tool”), was tripled. About $70 billion a year was lost in government revenue, so that in those thirteen years the wealthiest 1 percent of the country gained a trillion dollars.

As William Greider pointed out, in his remarkable book
Who Will Tell The People? The Betrayal of American Democracy
:

Not only did the income tax become less progressive during the last decades of the century, but the Social Security tax became more
regressive.
That is, more and more was deducted from the salary checks of the poor and middle classes, but when salaries reached $42,000 no more was deducted, By the early 1990s, a middle-income family earning $37,800 a year paid 7.65 percent of its income in Social Security taxes. A family earning ten times as much, $378,000 paid 1.46 percent of its income in Social Security taxes.

The result of these higher payroll taxes was that three-fourths of all wage earners paid more each year through the Social Security tax than through the income tax. Embarrassingly for the Democratic party, which was supposed to be the party of the working class, those higher payroll taxes had been put in motion under the administration of Jimmy Carter.

In a two-party system, if
both
parties ignore public opinion, there is no place voters can turn. And in the matter of taxation, it has been clear that American citizens have wanted taxes that are truly progressive. William Greider informs us that shortly after World War II, when rates on the very rich were up to 90 percent, a Gallup poll showed that 85 percent of the public thought the federal tax code was “fair.” But by 1984, when all those tax “reforms” had been put into effect by Democrats and Republicans, a public opinion survey by the Internal Revenue Service found that 80 percent of those polled agreed with the statement: “The present tax system benefits the rich and is unfair to the ordinary working man and woman.”

By the end of the Reagan years, the gap between rich and poor in the United States had grown dramatically. Where in 1980, the chief executive officers (CEOs) of corporations made forty times as much in salary as the average factory worker, by 1989 they were making ninety-three times as much. In the dozen years from 1977 to 1989, the before-tax income of the richest 1 percent rose 77 percent; meanwhile, for the poorest two-fifths of the population, there was no gain at all, indeed a small decline.

And because of favorable changes for the rich in the tax structure, the richest 1 percent, in the decade ending in 1990, saw their after-tax income increase 87 percent. In the same period, the after-tax income of the lower four-fifths of the population either went down 5 percent (at the poorest level) or went up no more than 8.6 percent.

While everybody at the lower levels was doing worse, there were especially heavy losses for blacks, Hispanics, women, and the young. The general impoverishment of the lowest-income groups that took place in the Reagan-Bush years hit black families hardest, with their lack of resources to start with and with racial discrimination facing them in jobs. The victories of the civil rights movement had opened up spaces for some African-Americans, but left others far behind.

At the end of the eighties, at least a third of African-American families fell below the official poverty level, and black unemployment seemed fixed at two and a half times that of whites, with young blacks out of work at the rate of 30 to 40 percent. The life expectancy of blacks remained at least ten years lower than that of whites. In Detroit, Washington, and Baltimore, the mortality rate for black babies was higher than in Jamaica or Costa Rica.

Along with poverty came broken homes, family violence, street crime, drugs. In Washington, D.C., with a concentrated population of black poor within walking distance of the marbled buildings of the national government, 42 percent of young black men between the ages of eighteen and thirty-five were either in jail, or out on probation or parole. The crime rate among blacks, instead of being seen as a crying demand for the elimination of poverty, was used by politicians to call for the building of more prisons.

The 1954 Supreme Court decision in
Brown
v.
Board of Education
had begun the process of desegregating schools. But poverty kept black children in ghettos and many schools around the country remained segregated by race and class. Supreme Court decisions in the seventies determined that there need be no equalization of funds for poor school districts and rich school districts (
San Antonio Independent School District
v.
Rodriguez
) and that the busing of children need not take place between wealthy suburbs and inner cities (
Milliken
v.
Bradley
).

To admirers of free enterprise and laissez-faire, those people were poor who did not work and produce, and so had themselves to blame for their poverty. They ignored the fact that women taking care of children on their own were working very hard indeed. They did not ask why babies who were not old enough to show their work skills should be penalized—to the point of death—for growing up in a poor family.

Ironically, it was Republican Kevin Phillips who, analyzing the Reagan years, wrote: “Less and less wealth was going to people who produced something . . . disproportionate rewards to society's economic, legal and cultural manipulators—from lawyers to financial advisers.”

In the mid-eighties, a major scandal began to emerge in Washington. The deregulation of the savings and loan banks begun in the Carter administration had continued under Reagan, leading to risky investments which drained the assets of the banks, leaving them owing billions of dollars to depositors, which the government had insured.

As the years went by and the problem was kept behind a screen, it was going to take more and more money to pay depositors and bail out these banks. The figure began to reach $200 billion. During the 1988 presidential campaign, the Democratic candidate Michael Dukakis was restrained from pointing the finger at the Republican administration because the Democrats in Congress were heavily involved in bringing about and then covering up the situation. So the voters were kept in the dark.

The enormous drain of money from the treasury for defense had once been declared by President Eisenhower to be a “theft” from human needs. But it was accepted by both parties, as Democrats competed with Republicans to show the electorate how “tough” they were.

Jimmy Carter as president had proposed a $10 billion increase in the military budget, an enactment of exactly what Eisenhower had described. All of the huge military budgets of the post–World War II period, from Truman to Reagan and Bush, were approved overwhelmingly by both Democrats and Republicans.

The spending of trillions of dollars to build up nuclear and nonnuclear forces was justified by fears that the Soviet Union, also building up its military forces, would invade Western Europe. But George Kennan, the former ambassador to the Soviet Union and one of the theoreticians of the cold war, said this fear had no basis in reality. And Harry Rositzke, who worked for the CIA for twenty-five years and was at one time CIA director of espionage operations against the Soviet Union, wrote in the 1980s: “In all of my years in government and since I have never seen an intelligence estimate that shows how it would be profitable to Soviet interests to invade Western Europe or to attack the United States.”

However, the creation of such a fear in the public mind was useful in arguing for the building of frightful and superfluous weapons. For instance, the
Trident
submarine, which was capable of firing hundreds of nuclear warheads, cost $1.5 billion. It was totally useless except in a nuclear war, in which case it would only add several hundred warheads to the tens of thousands already available. That $1.5 billion was enough to finance a five-year program of child immunization around the world against deadly diseases, and prevent five million deaths (Ruth Sivard,
World Military and Social Expenditures 1987–1988
).

In the mid-1980s, an analyst with the Rand Corporation, which did research for the Defense Department, told an interviewer in an unusually candid statement, that the enormous number of weapons was unnecessary from a military point of view, but were useful to convey a certain
image
at home and abroad:

In 1984, the CIA admitted that it had exaggerated Soviet military expenditures, that since 1975 it had claimed Soviet military spending was growing by 4 to 5 percent each year when the actual figure was 2 percent. Thus, by misinformation, even deception, the result was to inflate military expenditures.

One of the favorite military programs of the Reagan administration was the Star Wars program, in which billions were spent, supposedly to build a shield in space to stop enemy nuclear missiles in midair. But the first three tests of the technology failed. A fourth test was undertaken, with government funding for the program at stake. There was another failure, but Reagan's Secretary of Defense, Caspar Weinberger, approved the faking of results to show that the test had succeeded.

When the Soviet Union began to disintegrate in 1989, and there was no longer the familiar “Soviet threat,” the military budget was reduced somewhat, but still remained huge, with support from both Democrats and Republicans. In 1992, the head of the House Armed Services Committee, Les Aspin, a Democrat, proposed, in view of the new international situation, that the military budget be cut by 2%, from $281 billion to $275 billion.

That same year, as Democrats and Republicans both supported minor cuts in the military budget, a public opinion survey done for the National Press Club showed that 59 percent of American voters wanted a 50 percent cut in defense spending over the next five years.

It seemed that both parties had failed in persuading the citizenry that the military budget should continue at its high level. But they continued to ignore the public they were supposed to represent. In the summer of 1992, Congressional Democrats and Republicans joined to vote against a transfer of funds from the military budget to human needs, and voted to spend $120 billion to “defend” Europe, which everyone acknowledged was no longer in danger—if it ever had been—from Soviet attack.

Democrats and Republicans had long been joined in a “bipartisan foreign policy,” but in the Reagan-Bush years the United States government showed a special aggressiveness in the use of military force abroad. This was done either directly in invasions, or through both overt and covert support of right-wing tyrannies that cooperated with the United States.

Reagan came into office just after a revolution had taken place in Nicaragua, in which a popular Sandinista movement (named after the 1920s revolutionary hero Augusto Sandino) overthrew the corrupt Somoza dynasty (long supported by the United States). The Sandinistas, a coalition of Marxists, left-wing priests, and assorted nationalists, set about to give more land to the peasants and to spread education and health care among the poor.

The Reagan administration, seeing in this a “Communist” threat, but even more important, a challenge to the long U.S. control over governments in Central America, began immediately to work to overthrow the Sandinista government. It waged a secret war by having the CIA organize a counterrevolutionary force (the “contras”), many of whose leaders were former leaders of the hated National Guard under Somoza.